Monetizing Social Media…Beyond the Ad Model

This week I presented at the NextWeb event about monetizing in social media…beyond the ad model.  When we think of making money in social media, we are all hearing about advertising….demographical advertising,  behavioral advertising, contextual advertising.  In my opinion, a straight advertising model is a troubled model as 95% of all advertising goes to the top 10 sites.  We have to have multiple revenue streams if we are going to thrive and prosper.

The Problem with Advertising Only Model

By 2010 – According to eMarketer
-    Global Online Ad Spending will be $62 billion
-    Global Social Media Ad Spending will be $3.5 Billion
-    In the US, user-generated content sites will earn $4.3 billion in 2011 in ad revenues.

The problem…MySpace and Facebook are slated to take 74% of that Advertising revenue.

Also, because of all of the user generated content there is an over supply of ad inventory, which makes CPM rates dismal at best.  Facebook &. MySpace Ad rates are $0.13 per CPM.

To get your hands on the leftover $1.2 Billion advertising dollars, we have to create niche content, niche sites, and work in niche markets.  What do niche site demographics get for you?  Higher Ad Rates…and higher ad rates = more money.

OK – We all “get” advertising but what about other revenue streams that we are not talking about…In my opinion, a straight advertising model is a troubled model as 95% of all advertising goes to the top 10 sites.

Some Other Revenue Streams

Donations – So far this year Wikipedia got donations of over $3 million. Many independent news sites operate this way and depend on donations. Open Source has always worked this way.

Membership/Subscription/Freemiums Fees
Offering a paid membership or subscriptions is a good way to earn recurring income online. LinkedIn has made around $75 million – 100 million in 2008 so far – 1/4 of that is advertising, 3/4 is tiered subscriptions including corporate services with Job Search.

Expansions and Upgrades – Does your company offer software?  You can charge for new features & updates.

Merchandising of real life products through sites like CafePress and Zazzle, allow you to create an additional revenue stream from user customizable products on demand.

API based sales

• eBay allows members to trade on their own sites rather than forcing them to set up their stores on eBay. Their revenues increased by 86%.
• 40% of Salesforce revenue comes from external sites that use their API, not their own website.
• $490 million per quarter comes from Amazon’s API, not their site.

Online & Offline Events – webinars, tele-seminars, games, networking, workshops, conferences all have have an admission fee and if you have a targeted demographic, you can sell sponsorship.

Affiliate programs offer a revenue stream from revenue sharing programs.

Virtual Worlds
Gigaom forecasts Virtual World revenues to be $6 Billion by 2012.  Anything from Virtual goods, virtual real estate, & product placement and endorsements can be a great source of revenue.

There are many more revenue sources out there and there is money out there in Social Media you just have to look at your model and determine what you have that you can monetize.

Related posts:

1. New Marketing Summit: What’s next in Social media
2. How to Develop a Social Media Plan for Your Business in 5 Steps
3. 70% of the Webgrrls say they leverage or are totally immersed in social media
4. Social Media Benchmark Study
5. Microsoft Social Media Outreach Case Study